INDIVIOR INC. v. DR. REDDY'S LABORATORIES S.A.

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

INDIVIOR INC., INDIVIOR UK

Civ. No. 17-7111 (KM) (CLW)

LIMITED, and AQUESTIVE

THERAPEUTICS, INC., Civ. No. 18-1775 (KM) (CLW)

Civ. No. 18-5288 (KM) (CLW)

Plaintiffs,

v.

DR. REDDY’S LABORATORIES S.A.,

AND DR. REDDY’S LABORATORIES,

INC.,

Defendants.

INDIVIOR INC., INDIVIOR UK

Civ. No. 17-7106 (KM) (CLW)

LIMITED, and AQUESTIVE

THERAPEUTICS, INC., Civ. No. 18-8285 (KM) (CLW)

Plaintiffs,

v. OPINION

ALVOGEN PINE BROOK, INC., AND

ALVOGEN PINE BROOK LLC,

Defendants.

KEVIN MCNULTY, U.S.D.J.:

These consolidated patent infringement cases are brought by Indivior

Inc., Indivior UK Limited (collectively, “Indivior”), and Aquestive Therapeutics,

Inc. (“Aquestive”), against Dr. Reddy’s Laboratories S.A. and Dr. Reddy’s

Laboratories, Inc. (collectively, unless otherwise specified, “DRL”) and Alvogen

Pine Brook, Inc. and Alvogen Pine Brook LLC (collectively, unless otherwise

specified, “Alvogen”).

The patents-in-suit are Patent Nos. 9,931,305 (“the ’305 Patent”), issued

to Aquestive on April 3, 2018, and 9,687,454 (“the ’454 Patent”), issued to

Indivior on June 27, 2017. Indivior’s Suboxone film is also covered by Patent

No. 8,603,514 (“the ’514 Patent”). The ’514 Patent shares the same

specification with the ’305 Patent. As a result, the ’305 Patent was filed with a

terminal disclaimer to synchronize its expiration with that of the ’514 Patent.

Likewise, the ’454 Patent shares the same specifications with another patent,

U.S. Patent No. 8,475,832 (“the ’832 Patent”). This ’514 Patent and the ’832

Patent are not directly at issue here, but were at issue in a related litigation

involving similar parties filed in the United States District Court for the District

of Delaware (“the Delaware Litigation”).

Collectively, these patents describe formulations of Suboxone film1, a

“rapidly dissolving film that adheres to the underside of a patient’s tongue” or

cheek. Indivior’s Suboxone film is used to treat opioid dependency; it works to

decrease a patient’s need for opioids while also deterring abuse. Defendants are

manufacturers and developers of generic competitors to Suboxone film.

This matter has been extensively litigated for a number of years.

Currently before the Court are several motions: (1) Plaintiffs’ appeal of

Magistrate Judge Waldor’s Opinion and Order granting Defendants’ motion to

amend their answer to add counterclaims; (2) Aquestive’s motion to dismiss

Alvogen’s and DRL’s counterclaims; and (3) Defendants’ motion for a Rule 54(b)

entry of a partial final judgment of noninfringement.2

For the reasons outlined herein, I will:

1. Deny Plaintiffs’ appeal of Judge Waldor’s Opinion and Order;

2. Deny Aquestive’s motion to dismiss; and

1 Suboxone film is Plaintiffs’ brand name for co-formulated

buprenorphine/naloxone sublingual film.

2 I am also in receipt of a number of letters filed in both actions (See, e.g., 7106

Action, DE 316, 318, 319) concerning these motions and whether to administratively

terminate certain motions in favor of granting Plaintiffs leave to file a motion for

summary judgment. These scheduling matters will be referred to the Magistrate Judge

for decision.

3. Deny Defendants’ motion for a Rule 54(b) entry of partial final

judgment.

I. Relevant Procedural History3

I write for the parties and assume they are familiar with the key facts of

this matter. Nevertheless, I will first briefly review the relevant procedural

history surrounding the litigation of the at-issue patents, both in this district

and elsewhere.

In 2014, Indivior’s predecessor, Reckitt Benckiser, brought suit in the

District of Delaware against a number of parties alleging infringement of

several patents, including the ’832 Patent and the ’514 Patent. After two bench

trials, the Delaware district court held that Indivior had failed to meet its

burden of showing that DRL’s and Alvogen’s generic versions infringed the

claims of the ’514 Patent for Suboxone film and found the ’832 patent invalid

for obviousness and indefiniteness. Reckitt Benckiser Pharm. Inc. v. Watson

Labs., Inc., No. CV 13-1674-RGA, 2016 WL 3186659, at *27 (D. Del. June 3,

2016); Reckitt Benckiser Pharm. Inc. v. Dr. Reddy’s Labs. S.A., Nos. 14-1451,

14-1573, 14-1574, 2017 WL 3837312 (D. Del. Aug. 31, 2017); Reckitt Benckiser

Pharm. Inc. v. Dr. Reddy’s Labs. S.A., No. CV 14-1451-RGA, 2017 WL 3782782

3 Citations to the record will be abbreviated as follows. Citations to page numbers

refer to the page numbers assigned through the Electronic Court Filing system, unless

otherwise indicated:

“DE” = Docket entry number in this case.

“7106 Action” = Civil Action No. 2:17-cv-7106-KM-CLW.

“7111 Action” = Civil Action No. 2:17-cv-7111-KM-CLW.

“’305 Patent” = United States Patent No. 9,931,305, Pl. Ex. A (Dkt. No. 7106 at

DE 135-1; Dkt. No. 7111 at DE 250-1).

“’454 Patent” = United States Patent No. 9,687,454, Pl. Ex. B (Dkt. No. 7106 at

DE 135-1; Dkt. No. 7111 at DE 250-1).

“’514 Patent” = United States Patent No. 8,603,514, Pl. Ex. C (Dkt. No. 7106 at

DE 135-1; Dkt. No. 7111 at DE 250-1).

“’832 Patent” = United States Patent No. 8,475,832.

(D. Del. Aug. 31, 2017); Indivior Inc. v. Mylan Techs. Inc., 298 F. Supp. 3d 775

(D. Del. 2018). Indivior then appealed to the Federal Circuit.

While the Delaware Litigation was proceeding, in 2016, dozens of states

filed antitrust lawsuits against Indivior concerning its Suboxone products.

Plaintiffs responded to the Delaware rulings by applying for two

additional patents. First, the ’454 Patent issued to Indivior on June 27, 2017.

Second, the ’305 Patent4 issued to Aquestive on April 3, 2018. Following the

issuance of these patents, on September 14, 2017, Plaintiffs filed the 7106 and

7111 Actions, alleging infringement of the ’454 Patent.5 On April 3, 2018,

Plaintiffs then filed suit against DRL and Alvogen claiming infringement of the

new ’305 Patent. (See 2:18-cv-5288 at DE 1; 2:18-cv-5285 at DE 1). Ultimately

all of these actions were consolidated.

Upon learning of DRL’s plans to launch the ANDA product “at risk,” in

June 2018 Indivior moved to enjoin DRL from bringing its generic Suboxone

film to market. (7111 Action at DE 70, 71)

On July 13, 2018, I granted the motion for a preliminary injunction,

believing that Indivior had successfully “claimed around” the problem that

produced the Delaware rulings. (Id. at DE 121). DRL then appealed to the

Federal Circuit, which disagreed. On November 20, 2018, the Federal Circuit,

over a dissent, reversed and remanded, finding that Indivior was unlikely to

succeed on the merits of its infringement claim. Indivior Inc. v. Dr. Reddy’s

Labs., S.A., 752 F. App’x 1024 (Fed. Cir. 2018) (“Indivior I”).

Meanwhile, on January 22, 2019, Indivior moved in this Court for

temporary restraints and a preliminary injunction to prevent Alvogen from

launching its generic product prior to the Federal Circuit’s issuance of its

mandate in Indivior I. (7106 Action at DE 83). I granted a temporary restraining

4 The ’514 Patent and the ’305 Patent largely overlap, except as to the language of

one claim—Claim 26 of the ’305 Patent and Claim 62 of the ’514 Patent.

5 The ’832 Patent and the ’454 Patent have the same specifications, but the ’454

Patent is directed to a bioequivalent film version of Suboxone tablets.

order (“TRO”) enjoining Alvogen from launching in order to preserve the status

quo pending the issuance of the mandate. (Id. at DE 88)

On February 4, 2019, the Federal Circuit denied rehearing in Indivior I.

On February 19, 2019, the Federal Circuit issued its mandate vacating the

DRL preliminary injunction. The same day, I vacated the injunctive restraints.

(Id. at DE 119). DRL and Alvogen then proceeded to bring to market their

generic versions of Suboxone films.

On April 9, 2019, the Department of Justice announced that Indivior had

been indicted for “engaging in an illicit nationwide scheme to increase

prescriptions of Suboxone Film, an opioid drug used in the treatment of opioid

addiction.” U.S. v. Indivior Inc. et al, No. 19-cr-16 (W.D. Va. Apr. 9, 20190).

On July 11, 2019, the U.S. Federal Trade Commission (“FTC”) filed a

complaint against Indivior alleging anticompetitive conduct. F.T.C. v. Reckitt

Benckiser Group PLC et al, No. 19-28 (W.D. Va. July 11, 2019).

On July 12, 2019, the Federal Circuit, issued its opinion on the appeals

taken in the Delaware Litigation. In this opinion, here deemed Indivior II, the

Federal Circuit largely upheld the Delaware district court’s findings. Indivior

Inc. v. Dr. Reddy’s Labs., S.A., 930 F.3d 1325, 1339 (Fed. Cir. 2019) (“Indivior

II”). In analyzing the ’514 Patent in Indivior II, the Federal Circuit made clear

that for these purposes, the claims of the ’305 Patent are indistinct from those

of the ’514 Patent.

On November 5, 2019, I entered an Opinion construing key terms of the

patents in suit here following a Markman hearing. (7106 Action at DE 215;

7111 Action at DE 294)

On November 19, 2019, Judge Waldor issued an Opinion and Order

permitting Alvogen and DRL to file their first amended answer with affirmative

defenses and counterclaims. (7106 Action at DE 217; 7111 Action at DE 296)

DRL’s first amended answer asserts two counterclaims:

Count 1: Monopolization and Conspiracy to Monopolize in violation of

Section 2 of the Sherman Act; and

Count 2: Recovery of Damages for wrongful injunction against sureties.

(7111 Action at DE 218)

Alvogen’s answer asserts two counterclaims:

Count 1: Monopolization and Conspiracy to Monopolize in violation of

Section 2 of the Sherman Act; and

Count 2: Monopolization and Conspiracy to Monopolize in violation of the

New Jersey Antitrust Act.

(7106 Action at DE 297)

On December 4, 2019, Plaintiffs filed an appeal of Judge Waldor’s

Opinion and Order to this Court. Defendants oppose the appeal. (7106 Action

at DE 220, DE 229; 7111 Action at DE 300, DE 311)

On January 9, 2020, I so-ordered the parties’ stipulation of non-

infringement as to the ’305 Patent. (7106 Action at DE 240; 7111 Action at DE

323) The stipulation was entered subject to the parties’ reservation of rights on

appeal.

On January 17, 2020, Aquestive then moved to dismiss Defendants’

counterclaims. (7106 Action at DE 250; 7111 Action at DE 330) Indivior did

not join in this motion and instead filed an answer to the counterclaims. (7106

Action at DE 251; 7111 Action at DE 331)

On January 21, 2020, DRL moved for entry of partial judgment under

Rule 54(b) in the 7111 Action. (DE 334) Three days later, on January 24, 2020,

Alvogen filed a similar motion. (DE 261)

II. Appeal of Ruling on Motion to Amend and Motion to Dismiss

Because of the largely overlapping issues presented by Plaintiffs’ appeal

and by Aquestive’s motion to dismiss, I will address these motions together in

Section II of this Opinion. I will separately address Defendants’ motion for

partial judgment under Rule 54(b) in Section III.

A. Applicable Standards

i. Standard of Review of a Magistrate Judge’s Decision

If a party objects to a magistrate judge’s order regarding a

nondispositive matter, the district court “must consider timely

objections and modify or set aside any part of the order that is

clearly erroneous or is contrary to law.” Id.; 28 U.S.C. §

636(b)(1)(A). This standard requires the District Court to review

findings of fact for clear error and to review matters of law de novo.

Haines v. Liggett Grp. Inc., 975 F.2d 81, 91 (3d Cir. 1992).

Equal Employment Opportunity Comm’n v. City of Long Branch, 866 F.3d 93, 99

(3d Cir. 2017). See also Fed. R. Civ. P. 72(a); L. Civ. R. 72.1(c)(1)(A). This Court

has frequently spoken of the discretion granted to the Magistrate Judge in non-

dispositive matters. Where the appeal seeks review of a matter within the core

competence of the Magistrate Judge, such as a discovery dispute, the court will

defer to the Magistrate Judge’s discretion. See Cooper Hospital/Univ. Med. Ctr. v.

Sullivan, 183 F.R.D. 119, 127 (D.N.J. 1998); Deluccia v. City of Paterson, No. 09-

703, 2012 WL 909548, at *1 (D.N.J. March 15, 2012). “This deferential standard

is especially appropriate where the Magistrate Judge has managed this case from

the outset and developed a thorough knowledge of the proceedings.” Lithuanian

Commerce Corp., Ltd. v. Sara Lee Hosiery, 177 F.R.D. 205, 214 (D.N.J. 1997)

(internal quotations omitted); see Deluccia, 2012 WL 909548, at *1 (same).6

A report and recommendation on a dispositive issue, though, requires

plenary review:

The product of a magistrate judge, following a referral of a

dispositive matter, is often called a “report and recommendation.”

Parties “may serve and file specific written objections to the

proposed findings and recommendations” within 14 days of being

served with a copy of the magistrate judge’s report and

recommendation. Fed. R. Civ. P. 72(b)(2). If a party objects timely

to a magistrate judge’s report and recommendation, the district

court must “make a de novo determination of those portions of the

report or specified proposed findings or recommendations to which

objection is made.” 28 U.S.C. § 636(b)(1); see also Fed. R. Civ. P.

72(b)(3).

6 The standard of review of nondispositive matters has sometimes been referred

to as abuse of discretion. As a practical matter, it makes little difference, because

abuse-of-discretion review incorporates plenary review of legal questions and clear-

error review of factual questions. See Koon v. United States, 518 U.S. 81, 100 (1996) (a

court “by definition abuses its discretion when it makes an error of law”); Doeblers’

Pennsylvania Hybrids, Inc. v. Doebler, 442 F.3d 812, 819 (3d Cir. 2006) (abuse of

discretion may encompass “a clearly erroneous finding of fact, an errant conclusion of

law, or an improper application of law to fact”).

Equal Employment Opportunity Comm’n v. City of Long Branch, 866 F.3d at 99–

100.

A dispositive motion, if denied, is in a trivial sense non-dispositive. Still,

these particular motions were potentially dispositive, not of a routine

amendment, but of the addition of new and significant counterclaims not

previously available. Thus, in an abundance of caution, I give Judge Waldor’s

decision, and the motion to dismiss, see infra, the same plenary level of review.

ii. Motion to Dismiss Standard

Federal Rule of Civil Procedure 8(a) does not require that a complaint

contain detailed factual allegations. Nevertheless, “a plaintiff’s obligation to

provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and

conclusions, and a formulaic recitation of the elements of a cause of action will

not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Phillips v.

Cnty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (Rule 8 “requires a

‘showing’ rather than a blanket assertion of an entitlement to relief.” (citation

omitted)). Thus, the complaint’s factual allegations must be sufficient to raise a

plaintiff’s right to relief above a speculative level, so that a claim is “plausible

on its face.” Twombly, 550 U.S. at 570; see also West Run Student Hous.

Assocs., LLC v. Huntington Nat. Bank, 712 F.3d 165, 169 (3d Cir. 2013).

That facial-plausibility standard is met “when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (citing Twombly, 550 U.S. at 556). While “[t]he plausibility standard

is not akin to a ‘probability requirement’ . . . it asks for more than a sheer

possibility.” Id.

Rule 12(b)(6) provides for the dismissal of a complaint if it fails to state a

claim upon which relief can be granted. The defendant, as the moving party,

bears the burden of showing that no claim has been stated. Animal Science

Products, Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011).

For the purposes of a motion to dismiss, the facts alleged in the complaint are

accepted as true and all reasonable inferences are drawn in favor of the

plaintiff. New Jersey Carpenters & the Trustees Thereof v. Tishman Const. Corp.

of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).

For the purposes of a motion to dismiss, the facts alleged in the

counterclaim-complaint are accepted as true and all reasonable inferences are

drawn in favor of the plaintiff. New Jersey Carpenters & the Trustees Thereof v.

Tishman Const Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).

B. Discussion

i. The Appeal and Motion to Dismiss7

Plaintiffs appeal from Magistrate Judge Waldor’s November 19, 2019

decision (DE 217) granting Defendants’ motion to file a first amended answer

with counterclaims pursuant to Fed. R. Civ. P. 72(a) and Local Rule 72.1(c). As

to the antitrust counterclaims, Aquestive also moves to dismiss. For the

reasons stated herein, I will affirm Magistrate Judge Waldor’s decision and

deny the motion to dismiss. Subsection 1 addresses DRL’s wrongful-injunction

counterclaim; subsection 2 addresses the antitrust arguments.

1. DRL’s Second Counterclaim

As part of its amended answer, DRL asserts a second counterclaim

seeking to recover damages from a Surety for a wrongful injunction. (7111

Action, DE 297 at 67) Plaintiffs assert that DRL lacks Article III standing to

assert such a claim. DRL’s injury, they say, is not actual because it is based on

speculation that Indivior will be unable to satisfy any final judgment against it.

(DE 220-1 at 23-25) Plaintiffs add that the wrongfulness, or not, of the

injunction cannot be determined until there is a final judgment.

DRL responds that it has standing to pursue its claims based on the

numerous rulings in this case, Indivior I, and Indivior II. (DE 229 at 24-25) The

parties moreover have stipulated that DRL did not infringe the ’305 Patent.

7 Because identical briefing was filed in both actions, unless otherwise indicated,

I will refer to the docket entry numbers for the briefing filed in the 7106 Action

throughout Section II of this Opinion.

That is enough, says DRL, to establish that it was wrongfully enjoined and is

entitled to recover under the bond. I agree, at least insofar as the claims as to

the ’305 Patent have been finally decided. (See 7106 Action at DE 240; 7111

Action at DE 323)

Rule 65 allows a successful defendant to collect on a bond if it is “found

to have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c); Atomic Oil

Co. of Okl. v. Bardahl Oil Co., 419 F.2d 1097, 1101 (10th Cir. 1969) (“Rule 65(c)

creates a cause of action for the costs and damages incurred by the enjoined

party should it later be determined that that party was wrongfully enjoined or

restrained.”).8 Indeed, that is the purpose of posting a bond. The Third Circuit

has held that Rule 65(c) “strongly implies” that a prevailing defendant is

entitled to damages on the injunction bond, and has adopted the stance of the

“clear majority of our sister circuits” that “have held that there is a rebuttable

presumption that a wrongfully enjoined party is entitled to recover provable

damages up to the bond amount.” Nat’l Collegiate Athletic Ass’n v. Governor of

New Jersey, 939 F.3d 597, 606-07 (3d Cir. 2019), cert. denied, 206 L. Ed. 2d

938 (May 18, 2020). As I held in connection with the Markman Opinion,

however, “[i]t is settled that one can recover on an injunction bond only after a

trial and final judgment on the merits.” Clark v. K-Mart Corp., 979 F.2d 965,

969 (3d Cir. 1992); Nat’l Collegiate Athletic Ass’n, 939 F.3d at 605 (confirming

in the context of TRO that “whether a party was wrongfully enjoined depends

upon the final judgment on the merits”). Only an adverse final judgment

definitively establishes that a party was wrongfully enjoined in the interim.

Accordingly, should a final judgment establish that DRL was wrongfully

enjoined, it is presumptively entitled to recover on the injunction bond.

8 The full text of Rule 65(c) reads: “The court may issue a preliminary injunction

or a temporary restraining order only if the movant gives security in an amount that

the court considers proper to pay the costs and damages sustained by any party found

to have been wrongfully enjoined or restrained. The United States, its officers, and its

agencies are not required to give security.”

In a sense, DRL’s counterclaim, considered as such, is therefore

superfluous. Nevertheless, DRL can choose what claims to bring, and it

appears that courts have permitted such claims to be pled independently. The

elements of a claim for recovery on a bond posted pursuant to Rule 65(c) of the

Federal Rules of Civil Procedure are “(1) existence of the bond; (2) wrongful

issuance of the restraining order; and (3) damage to the restrained party

resulting from the restraining order.” Qualcomm, Inc. v. Motorola, Inc. 185

F.R.D. 285, 287 (S.D. Cal. 1999) (citing Buddy Systems, Inc. v. Exer–Genie, Inc.,

545 F.2d 1164, 1169 n. 10 (9th Cir. 1976), cert. denied, 431 U.S. 903 (1977)).

Here, DRL has pled facts that sufficiently establish all three elements.

Elements 1 and 3 are not controversial: A bond has been posted, and DRL has

plausibly alleged damages as a result of being prohibited from entering the

generic market.

As for Element 2, however, it remains to be finally determined whether

DRL was wrongfully enjoined as to all claims at issue here. It is true, of course,

that the preliminary injunction has been dissolved. It is also true that a final

determination of wrongfulness and entitlement to recovery must await entry of

a final judgment. Something similar might be said, however, of virtually any

claim a party might assert in a complaint; it does not undermine standing or

require dismissal of a claim that is plausibly asserted.

Accordingly, I will deny Plaintiffs’ appeal (7106 Action at DE 220; 7111

Action at DE 300) of Judge Waldor’s Opinion and Order insofar as it seeks to

overturn the decision to permit DRL to assert its second counterclaim for

recovery under the bond.

ii. Antitrust Arguments

As to the antitrust counterclaims, Plaintiffs’ appeal from Judge Waldor’s

Opinion and Aquestive’s motion to dismiss present overlapping arguments,

which I address together. For the reasons stated below, I will affirm Judge

Waldor’s Opinion permitting Defendants to assert antitrust counterclaims, and

deny Aquestive’s motion (7106 Action at DE 250; 7111 Action at DE 330) to

dismiss them.

1. Section 2 of the Sherman Act

“The offense of monopoly under § 2 of the Sherman Act has two

elements: (1) the possession of monopoly power in the relevant market and (2)

the willful acquisition or maintenance of that power as distinguished from

growth or development as a consequence of a superior product, business

acumen, or historic accident.” Queen City Pizza v. Domino’s Pizza, 124 F.3d

430, 437 (3d Cir. 1997) (quoting Aspen Skiing Co. v. Aspen Highlands Skiing

Corp., 472 U.S. 585, 596 n. 19 (1985)). An attempted monopolization claim has

three elements: “a plaintiff must prove that the defendant (1) engaged in

predatory or anticompetitive conduct with (2) specific intent to monopolize and

with (3) a dangerous probability of achieving monopoly power.” Id. at 442.

Under either section 1 or 2, the plaintiff bears the burden of pleading the

relevant geographic and product markets. Id. at 436-37.

A patentee can attempt to establish element 1, predatory or

anticompetitive conduct, by pleading facts that establish “(1) that the asserted

patent was obtained through knowing and willful fraud within the meaning of

Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S.

172, 177 (1965), or (2) that the infringement suit was ‘a mere sham to cover

what is actually nothing more than an attempt to interfere directly with the

business relationships of a competitor. Eastern R.R. Presidents Conference v.

Noerr Motor Freight, Inc., 365 U.S. 127, 144 (1961).’” Nobelpharma AB v.

Implant Innovations, Inc., 141 F.3d 1059, 1069 (Fed. Cir. 1998) (additional

internal citations omitted)).

The “sham litigation” theory is the one at issue here.9 Defendants allege

that Indivior’s patent litigation was part of an anticompetitive scheme.

9 Alvogen additionally asserts a second counterclaim for violations of the New

Jersey Antitrust Act. New Jersey’s Antitrust Act is essentially a replica of the federal

Sherman Antitrust Act, see, e.g., N.J. Stat. § 56:9-1, et seq, and must be interpreted

in accordance with federal antitrust principles. “This act shall be construed in

A Section 2 conspiracy claim, like the one Defendants assert against

Aquestive, has four elements: (1) an agreement to monopolize; (2) an overt act

in furtherance of the conspiracy; (3) a specific intent to monopolize; and (4) a

causal connection between the conspiracy and the injury alleged.” Howard

Hess Dental Labs. Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 253 (3d Cir. 2010).

2. Noerr-Pennington Doctrine10

Any antitrust claim based on a party’s pursuit of litigation must

negotiate the potential bar of the Noerr-Pennington doctrine. “Rooted in the

First Amendment and fears about the threat of chilling political speech,” the

Noerr–Pennington doctrine provides immunity from antitrust liability for parties

who petition the government for redress. In re Lipitor Antitrust Litig., 868 F.3d

231, 264 (3d Cir. 2017) (quoting AD. Bedell Wholesale Co. v. Phillip Morris Inc.,

263 F.3d 239, 250 (3d Cir. 2001)). The doctrine extends to “actions which

might otherwise violate the Sherman Act because ‘[t]he federal antitrust laws

do not regulate conduct of private individuals in seeking anticompetitive action

from the government.” Id. More broadly, “[g]overnment advocacy is protected by

Noerr–Pennington immunity; seeking governmental approval of a private

agreement is not.” Id. The scope of Noerr–Pennington immunity depends on the

source, context, and nature of the competitive restraint at issue. Id. Noerr–

Pennington has been extended to provide immunity to private efforts to

influence courts and agencies, whether federal or state, Bristol–Myers Squibb

Co. v. IVAX Corp., 77 F. Supp. 2d 606, 611 (D.N.J. 2000), and has been held to

shield plaintiffs from liability for pursuing state common law claims such as

harmony with ruling judicial interpretations of comparable Federal antitrust statutes

and to effectuate, insofar as practicable, a uniformity in the laws of those states which

enact it.” N.J. Stat. Ann. § 56:9-18. Accordingly, my analysis in Section II.B.ii

additionally applies to Alvogen’s counterclaim asserting violations of the New Jersey

Antitrust Act.

10 The titular cases are Eastern Railroad Presidents Conference v. Noerr Motor

Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers of America v. Pennington,

381 U.S. 657 (1965).

tortious interference with contract and tortious interference with prospective

economic gain. Santana Products, Inc. v. Bobrick Washroom Equipment, Inc.,

401 F.3d 123, 140 (3d Cir. 2005) (declining to decide whether a marketing

campaign is petitioning activity that could be immunized by the doctrine).

However, Noerr–Pennington is not an absolute shield that covers all

litigation and petitioning activity. Hanover 3201 Realty, LLC v. Village

Supermarkets, Inc., 806 F.3d 162, 178 (3d Cir. 2015). The immunity ends

where the litigation “is a mere sham to cover what is actually nothing more

than an attempt to interfere directly with the business relationships of a

competitor and the application of the Sherman Act would be justified.” Id.

(quoting Noerr Motor Freight, Inc., 365 U.S. at 144). In determining whether

litigations are a sham, the Third Circuit has adopted the approach that governs

in the Second, Fourth, and Ninth Circuits when applying California Motor

Transportation Co. v. Trucking Unlimited, 404 U.S. 508 (1972) and Professional

Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49

(1993). See Hanover 3201 Realty, LLC., 806 F.3d at 180. First, the court must

determine whether there has been a single filing or a series of filings. Id. If

there has been just a single filing, there must be “a showing of objective

baselessness before looking into the subjective motivations” of the party alleged

to have engaged in anti–competitive behavior. Id. (noting that Professional Real

Estate’s “exacting two-step test” puts a heavy thumb on the scale in favor of

the party who has had a claim made against it). On the other hand, when faced

with a “series or pattern of lawsuits,” a more flexible approach is warranted. Id.

In that scenario, even if some of the petitions turn out to have objective merit,

the claimant is not automatically immunized from liability. Id.

A court may decide the applicability of the Noerr–Pennington doctrine on

a motion to dismiss under Fed. R. Civ. P. 12(b)(6) if no factual issues are

present. Trustees of Univ. of Pa. v. St. Jude Children’s Res. Hosp., 940 F. Supp.

2d 233, 242–43 (E.D. Pa. 2013) (“To be sure, the question of whether litigation

is a sham can be a fact question for the jury. But as the Supreme Court

explained in PRE, when there is no dispute over the predicate facts of the

underlying legal proceeding, a court may decide probable cause [and thus

Noerr–Pennington applicability] as a matter of law.” (citations omitted and

emphasis added)); Asphalt Paving Sys. v. Asphalt Maint. Sols., LLC, No. 12–

2370, 2013 WL 1292200, at *7–*8 (E.D. Pa. Mar. 28, 2013) (deciding only that

Noerr–Pennington immunity applied in its grant of dismissal); Bristol–Myers

Squibb Co. v. WAX Corp., 77 F. Supp. 2d 606, 616 (D.N.J. 2000) (same).).

As Chief Judge Wolfson recently noted when surveying cases in this

district, the issue is a fact-intensive one, generally not suitable for resolution at

the pleading stage:

Notably, district courts within this Circuit have routinely prohibited

parties from invoking the protections of Noerr-Pennington at the dismissal

stage of a case in the context of patent suits, at which time the factual

record remains undeveloped and insufficient for the purpose of

determining whether a “sham litigation” has been filed. FTC v. Shire

ViroPharma, Inc., No. 17-131, 2018 WL 1401329, at *7, 2018 U.S. Dist.

LEXIS 45727, at *18 (D. Del. March 20, 2018) (“[W]hether [the patent

holder's] activity was in fact a sham under either standard is a factual

inquiry, which cannot be resolved at the motion to dismiss stage.”);

Otsuka Pharm. Co., 118 F.Supp.3d at 657 (“Moreover, even assuming the

allegations proved insufficient, the inquiry into whether [the plaintiff-

counter-defendant] maintains in this action ‘objectively and subjectively

baseless’ infringement claims turns upon issues of reasonableness and

intent—issues which are premature to consider upon the present

record.”); S3 Graphics Co. v. ATI Techs. ULC, No. 11-1298, 2014 WL

573358, at *3, 2014 U.S. Dist. LEXIS 16928, at *9 (D.N.J. Feb. 11, 2014)

(holding that the issue of Noerr-Pennington immunity is “not proper

before discovery”); Shionogi Pharma, Inc. v. Mylan, Inc., No. 10-1077,

2011 WL 3860680, at *6, 2011 U.S. Dist. LEXIS 98547, at *6 (D. Del.

Aug. 31, 2011) (“Whether the underlying litigation is baseless is a factual

issue not to be determined on a motion to dismiss.”); In re Metoprolol

Succinate Direct Purchaser Antitrust Litig., No. 06-52, 2010 WL 1485328,

at *10, 2010 U.S. Dist. LEXIS 36303, at *34 (D. Del. April 13, 2010) *395

(“The court, however, cannot [determine whether Noerr-Pennington

applies] at the motion to dismiss stage, because it is fact intensive”);

Hoffman La Roche Inc. v. Genpharm Inc., 50 F.Supp.2d 367, 380 (D.N.J.

1999) (“Reasonableness is a question of fact, and the Court cannot make

such factual determinations on a factual controversy roiled by a motion

to dismiss.”).

Takeda Pharm. Co. Ltd. v. Zydus Pharm. (USA) Inc., 358 F. Supp. 3d 389, 394–

95 (D.N.J. 2018).

3. Analysis of the Antitrust Claims

a. Appeal

On appeal, Plaintiffs (as counterclaim defendants) argue that Judge

Waldor’s Opinion and Order contained clear error. (DE 220) Plaintiffs assert

that, under Noerr-Pennington, their actions here—particularly, filing these

Hatch-Waxman suits and obtaining preliminary injunctions—are

presumptively shielded from antitrust liability. The facts pled, in Defendants’

view, are not sufficient to overcome this presumption, and Judge Waldor

should have rejected any claim based on the narrow “sham litigation” exception

to the Noerr-Pennington Doctrine. (Id. at 6) At this, the pleading stage, I must

disagree.

I pause briefly to consider the threshold issue of the timeliness of this

amendment, which was asserted after the deadline to amend pleadings. Rule

16 imbues Magistrate Judges with wide discretion in determining whether

“good cause” to warrant amendment has been presented.11 Judge Waldor cited

the discovery of emails and documents attached to the Indivior Indictment,

which came to light after the deadline to amend pleadings. (DE 217 at 4) I

agree with Judge Waldor that there was good cause to permit a belated

amendment.

Judge Waldor then turned to the substance of whether the Rule 15

motion to amend should be granted. Plaintiffs argued before Judge Waldor, and

continue to do so in their motion here, that the sham litigation exception to

11 Recent Third Circuit guidance confirms the aptness of Judge Waldor’s

approach. Before considering whether Rule 15’s standard for amendment governed,

Judge Waldor appropriately considered whether Defendants’ motion met Rule 16’s

more demanding requirements. “When a party moves to amend or add a party after

the deadline in a district court’s scheduling order has passed, the “good cause”

standard of Rule 16(b)(4) of the Federal Rules of Civil Procedure applies. A party must

meet this standard before a district court considers whether the party also meets Rule

15(a)’s more liberal standard.” Premier Comp Sols., LLC v. UPMC, No. 19-1838, 2020

WL 4668235, at *2 (3d Cir. Aug. 12, 2020).

Noerr-Pennington had not been adequately pled and that Defendants’

amendments should therefore be rejected as futile. (DE 217 at 5) Judge Waldor

rejected these arguments and I do as well.

“Futility,” in this context, means that the proposed amended complaint

“would not withstand a motion to dismiss.” Massarsky v. Gen. Motors Corp.,

706 F.2d 111, 125 (3d Cir. 1983); see also Brown v. Philip Morris Inc., 250 F.3d

789, 796 (3d Cir. 2001); Jablonski, 863 F.2d at 292; Adams v. Gould Inc., 739

F.2d 858, 864 (3d Cir. 1984). Therefore, “[i]n assessing ‘futility,’ the District

Court applies the same standard of legal sufficiency as applies under Rule

12(b)(6).” Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000); see also Section

II.A.ii, supra (motion to dismiss standards). “[I]f the proposed amendment ‘is

frivolous or advances a claim or defense that is legally insufficient on its face,

the court may deny the motion to amend. If a proposed amendment is not

clearly futile, then denial of leave to amend is improper.” Harrison Beverage Co.

v. Dribeck Importers, Inc., 133 F.R.D. 463, 468 (D.N.J. 1990).

The analysis therefore merges with the motion to dismiss, discussed in

the next section. For the reasons outlined there, Defendants’ proposed

amendments are not futile, because they would withstand a motion to dismiss.

b. Motion to Dismiss

In moving to dismiss, Aquestive reasserts the “sham litigation”

arguments it presented in its appeal of Judge Waldor’s decision. (DE 250 at 20)

Aquestive adds that Defendants’ allegations fail because (1) there are no facts

that establish Aquestive is a competitor in the relevant market (MTD Br. at 13-

16); (2) the allegations improperly allege a shared monopoly (Id. at 16-18); and

(3) Defendants efforts at group pleading fail to specifically address Aquestive’s

individual conduct (Id. at 18-19).

First, I reject Plaintiffs’ argument that Defendants have failed to

sufficiently allege that they engaged in anticompetitive “sham litigation.” This is

not a case of a single filing. The antitrust allegations in the first instance assert

that Plaintiffs’ claims were objectively baseless and part of a larger strategic

effort by Plaintiffs to take steps that they knew would delay or inhibit FDA

authorization for generic competitors. (See, e.g., 7106 Action, DE 218 ¶¶ 71-74,

87, 90) The counterclaims allege some particulars of that overall strategic

anticompetitive effort. For example, “when faced with imminent generic

competition, Indivior engaged in an elaborate corporate marketing strategy to

mislead physicians and patients in order to eliminate generic competition for

its products.” (Id. ¶ 106) Moreover, Indivior “fabricated [a] safety story that

Suboxone Film was safer, namely that the film would protect against diversion

and accidental child exposure as compared to the tablets” to get patients to

switch to using the films and to undermine the market for tablets. (Id. ¶ 110).

Indivior likewise is alleged to have developed a marketing strategy to extend its

monopoly power by, for example, increasing the cost of its tablets to encourage

patients to switch. (Id. ¶¶ 113, 156–66) Aquestive was allegedly part and parcel

of this strategy, as it owned the ’305 Patent and agreed with Indivior to

continue to file for new patents, then file lawsuits here and elsewhere, which

included seeking injunctions based on new patents that were patentably

indistinct from the patents at issue in Indivior II. (Id. ¶¶ 115-145)

Second, the counterclaims assert that Plaintiffs controlled pricing and

output of products in that they controlled 100% of the Suboxone market in the

US and used this power to harm competition. (Id. ¶¶ 196-99) Defendants allege

that Plaintiffs, including Aquestive, collectively leveraged their patents to

develop marketing and legal strategies that enabled Indivior to manipulate the

market for Suboxone products and decrease competition for their Suboxone

Film. (Id. ¶¶ 196-99)

The patent litigation, the counterclaim asserts, was part of this

anticompetitive strategy. Now of course, under Noerr-Pennington, it is not

enough that the underlying patent claims did not succeed. I expect Plaintiffs

will have much to say about the colorable, good faith basis for their patent

claims, irrespective of whether they ultimately prevailed. See, e.g., Takeda,

supra. Two judges have seen things Plaintiffs’ way, at least on certain issues.

But the Defendants have sufficiently alleged that the underlying litigation was

baseless and was intended to stifle competition. The rest must await summary

judgment or a trial. Accordingly, I find that the allegations in the counterclaims

sufficiently plead the sham litigation exception.

In so holding I am mindful that, as this court recently held, “the inquiry

into whether [Plaintiff] maintains in this action ‘objectively and subjectively

baseless’ infringement claims turns upon issues of reasonableness and intent-

issues which are premature to consider upon the present record. Indeed,

resolution of these inherently factual issues requires consideration of whether

[Plaintiff] undertook a reasonable investigation in advance of pursuing its

infringement claims, whether [Plaintiff] undertook this action for an improper

and anticompetitive purpose, and whether a reasonable litigant could have

realistically expected success on the merits at the time of filing.” Otsuka Pharm.

Co. v. Torrent Pharm. Ltd., Inc., 118 F. Supp. 3d 646, 657 (D.N.J. 2015). None

of these issues are ripe for a determination at this stage of the proceedings.

Aquestive’s remaining arguments—(1) that there are no facts that

establish Aquestive is a competitor in the relevant market (MTD Br. at 13-16);

and (2) that the allegations improperly allege a shared monopoly (Id. at 16-

18)—fare no better. These arguments address a purported claim that Aquestive

had monopoly power in the relevant market. But these arguments are ancillary

to Defendants’ claim, which is that Aquestive conspired with Indivior to further

Indivior’s monopoly power. It is well established that “a claim of conspiracy to

monopolize requires only that a company agree with another company to assist

the first in its attempt to monopolize the relevant market.” In re Suboxone

(Buprenorphine Hydrochloride & Naloxone) Antitrust Litig., No. 13-MD-2445,

2017 WL 4910673, at *11 (E.D. Pa. Oct. 30, 2017); Carpet Grp. Int’l v. Oriental

Rug Importers Ass’n, Inc., 256 F. Supp. 2d 249, 283 (D.N.J. 2003) (“[T]he proof

required to demonstrate a conspiracy to monopolize does not require a proof of

market power in a relevant market.”). Defendants assert that Aquestive helped

conspire with Indivior to impermissibly protect Indivior’s market power and

monopoly. Aquestive contributed to this conspiracy by applying for new

patents, filing lawsuits and multiple motions in conjunction with Indivior, and

by manufacturing the film for Indivior to then market. (See, e.g., 7111 Action,

DE 297 ¶¶ 17, 82, 96-99, 266-67) These allegations are sufficient to establish a

claim for conspiracy to monopolize at the motion to dismiss stage.

Accordingly, Aquestive’s motion to dismiss Defendants’ antitrust claims

is denied.

III. Motion for a Rule 54(b) Entry of Partial Final Judgment

In the 7111 Action, DRL moved for an entry of final partial judgment of

non-infringement as to the ’305 Patent. (7111 Action at DE 334) Alvogen then

joined in the motion (7106 Action at DE 261), which Plaintiffs oppose. (7111

Action at DE 350)

Generally, an order which terminates fewer than all claims, or claims

against fewer than all parties to an action, does not constitute a “final” decision

for purposes of 28 U.S.C. § 1291. Under Rule 54(b), however, a district court

may convert such a partial order to a final decision over which a court of

appeals may then exercise jurisdiction.

Federal Rule 54(b) provides as follows:

When an action presents more than one claim for relief-whether as a

claim, counterclaim, crossclaim, or third-party claim-or when multiple

parties are involved, the court may direct entry of a final judgment as to

one or more, but fewer than all, claims or parties only if the court

expressly determines that there is no just reason for delay. Otherwise,

any order or other decision, however designated, that adjudicates fewer

than all the claims or the rights and liabilities of fewer than all the

parties does not end the action as to any of the claims or parties and

may be revised at any time before the entry of a judgment adjudicating

all the claims and all the parties’ rights and liabilities.

Fed. R. Civ. P. 54(b). Certification under Rule 54(b) is the exception, not the

norm. “Not all final judgments on individual claims should be immediately

appealable, even if they are in some sense separable from the remaining

unresolved claims. The function of the district court under the Rule is to act as

a ‘dispatcher.’ It is left to the sound judicial discretion of the district court to

determine” when an action may be certified as final. Curtiss–Wright Corp. v.

Gen. Elec. Co., 446 U.S. 1, 8-9 (1980) (citations omitted). “The power which this

Rule confers upon the trial judge should be used only in the infrequent harsh

case as an instrument for the improved administration of justice and the more

satisfactory disposition of litigation in the light of the public policy indicated by

statute [28 U.S.C. § 1291] and rule.” Panichella v. Pa. R.R. Co., 252 F.2d 452,

455 (3d Cir.1958).

The Supreme Court has set forth the steps a court must take in making

determinations under Rule 54(b). First, a district court must determine that it

is dealing with a “final judgment” as to the particular claim at issue. “It must

be a ‘judgment’ in the sense that it is a decision upon a cognizable claim for

relief, and it must be ‘final’ in the sense that it is ‘an ultimate disposition of an

individual claim entered in the course of a multiple claims action.’” Curtiss–

Wright, 446 U.S. at 7 (quoting Sears, Roebuck & Co. v. Mackey, 351 U.S. 427

(1956)). Having made a finding of finality, the court must then determine

whether there is “any just reason for delay.” Id. at 8.

Here, there appears to be no dispute that there has been a final

resolution (subject to appeal, of course) of the claims concerning the ’305

Patent. Indeed, Plaintiffs have entered into a stipulated judgment that

Defendants did not infringe the ’305 Patent as construed in my Markman

Opinion and Order. (See 7111 Action at DE 323)

The parties disagree, however, as to whether there is “any just reason”

for delaying entry of a Rule 54(b) final judgment on the ’305 claims. “This latter

requirement, that a district court ‘must go on to determine whether there is

any just reason for delay,’ is not merely formalistic.” Elliott v. Archdiocese of

New York, 682 F.3d 213, 220 (3d Cir. 2012). The Third Circuit has set forth

several factors to be considered when assessing if there is a “just reason for

delay” under Rule 54(b):

(1) the relationship between the adjudicated and unadjudicated claims;

(2) the possibility that the need for review might or might not be mooted

by future developments in the district court;

(3) the possibility that the reviewing court might be obliged to consider

the same issue a second time;

(4) the presence or absence of a claim or counterclaim which could result

in set-off against the judgment sought to be made final;

(5) miscellaneous factors such as delay, economic and solvency

considerations, shortening the time of trial, frivolity of competing claims,

expense, and the like.

Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 203 (3d Cir. 2006) (citing

Allis–Chalmers Corp. v. Philadelphia Elec. Co., 521 F.2d 360, 364 (3d Cir.

1975)).

Here I find good reason to delay entry of a final judgment as to the ’305

Patent claims. Although the Rule 54(b) motion cites case law severing patent

claims from antitrust claims, there is here the complicating factor of the yet-

unadjudicated claims under the ’454 patent. I take the Defendants’ point that

the claims are separate, but I nevertheless find as a matter of case

management that any final judgment should at least await the resolution of all

the patent issues.

Factor 1, the relationship between the adjudicated and unadjudicated

claims, counsels delay in entry of judgment. “Where the adjudicated and

unadjudicated claims share significant similarities, such as involving the same

parties, the same legal issues, or the same evidence, Rule 54(b) certification is

disfavored.” Ortho-McNeil Pharm., Inc. v. Kali Labs., Inc., No. CIV A 02-5707

DMC, 2007 WL 1814080, at *3 (D.N.J. June 20, 2007). The parties focus

generally on the overlap between the claims concerning the ’305 Patent and the

antitrust counterclaims. My concern is more generally with the overlap between

the ’305 Patent, the ’454 Patent, and the antitrust claims, and what would be

the most efficient way to resolve these issues. Certainly the parties in the

adjudicated and unadjudicated patent claims are identical and the legal and

factual issues, while not wholly identical, are intertwined and related. Factual

issues resolved under the ’305 Patent overlap with those concerning the

remaining claim as to the ’454 Patent. My Markman Opinion and Order

construed the bioequivalence language under claim 1 of the’454 Patent and the

“a polyethylene oxide alone or in combination with a hydrophilic cellulosic

polymer” language in claims 9, 10, and 11. However, the primary issues and

defenses concerning whether DRL’s and Alvogen’s generic films infringe the

’454 Patent will largely overlap with the issues concerning the ’305 Patent.

Factors 3 and 4, too, suggest that Rule 54(b) certification should be

denied. Certification of the ’305 issues would likely result in a piecemeal appeal

to the Federal Circuit. If the claims as to the ’305 Patent were deemed final and

Plaintiff were to appeal, the Federal Circuit would have to evaluate the

correctness of the basis for finding the ’305 Patent was infringed. Regardless of

the outcome of that decision, the parties will inevitably appeal the Court’s

decision of the issues concerning the ’454 Patent and Defendants’

counterclaims. This second appeal would involve much of the same evidence

and many of the same legal issues as the first appeal. It would be far more

efficient for the Federal Circuit to review all of these issues, especially as they

relate to the ’305 Patent and the ’454 Patent, collectively rather than in

successive appeals that would turn largely on identical and interrelated facts.

Factor 2 slightly favors entry of a final judgment now. This Court has

already issued its definitive Markman opinion. Predictions are perilous, but it

seems unlikely that resolution of additional issues concerning the ’454 Patent

or Defendants’ antitrust claims would reach back to alter or moot the rulings

made thus far as to the ’305 Patent.

As to Factor 5, DRL points to the financial burden of being denied the

present ability to collect on the outstanding bond. I understand DRL’s

complaint that it deserves to collect on this bond (I set aside speculative issues

concerning a bonded stay pending appeal). This financial prejudice, however,

does not differ fundamentally from the usual course of litigation, in which a

plaintiff must generally await final judgment to be awarded damages. I note

also that DRL has now been allowed to bring their products to market. I

therefore find that the financial cost of delay, though real, does not outweigh

the procedural cost of piecemeal appeals that would depend on resolution of

similar facts and legal issues.

Accordingly, Defendants’ Rule 54(b) motion for entry of partial final

judgment as to non-infringement of the ’305 Patent is denied. I will, however,

deny this motion without prejudice to a renewed application to sever the patent

claims from the antitrust counterclaims after the ’454 Patent claims are

resolved.

IV. Conclusion

For the reasons set forth above, Plaintiffs’ appeal of Judge Waldor’s

December 4, 2019 Opinion and Order permitting Defendants to amend their

answer to add counterclaims (7106 Action DE 220; 7111 Action DE 300) is

denied.

Aquestive’s motion to dismiss Defendants’ counterclaims (7106 Action

DE 250; 7111 Action DE 330) is denied.

Defendants’ motion for entry of a partial final judgment (7106 Action DE

261; 7111 Action DE 334) is denied without prejudice.

An appropriate order follows.

Dated: August 24, 2020

/s/ Kevin McNulty

____________________________________

Kevin McNulty

United States District Judge